Kenneth Joseph Arrow (born August 23, 1921) is an American economist and joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972. To date, he is the youngest person to have received this award, at 51.The economics profession of course has contributed mightily to the arrival of the current crisis, particularly the proponents of neo-classical theory whose ideas have been at the root of demands for deregulation and lower taxes on corporations and the well-off. So it is worth noting when Kenneth Arrow focuses in on the problem of inequality. He said the following recently (courtesy of Mark Thoma at Economist's View):
In economics, he is considered an important figure in post-World War II neo-classical economic theory. Many of his former graduate students have gone on to win the Nobel Memorial Prize themselves. Arrow's impact on the economics profession has been tremendous. For more than fifty years he has been one of the most influential of all practicing economists.
The specific problems of the current U.S. economy—the drastic increase in unemployment and sluggish increase in output—overlay a tendency of much longer duration, a drastic and rapid increase in the inequality of income. Every economy of complexity produces an unequal distribution of the good things in life. But the period immediately following World War II showed a considerably increased equality of income compared with either the Great Depression or the previous period of relative prosperity.Of course that period was dominated by Keynesian economics. Arrow argues that while the U.S. has had productivity gains in the past few decades, they have not been widely shared.
Clearly, the bulk of the gains from increased productivity went to a small group of upper-income recipients. Indeed, closer study has shown that the bulk of the increase went to the top 1 percent of income recipients and much of that to those in the top .1 percent.... Profits from the finance sector, which historically have been about 10 percent of all profits, have risen to an extraordinary 40 percent....
This casts light on the claim that the problem is one of personal ethics, of greed....
A proper sense of responsibility has to be enforced by legislation, as it was in the 1930s. There has been some erosion in the law, for example under the Clinton administration, and in enforcement. The Dodd-Frank law is a step in the right direction, but the influence of the financial industry watered it down and created unnecessary complications.
It is not superfluous to argue that steepening the income tax progression, removing a number of blatant loopholes, such as the special treatment of capital gains, and reducing the exemption level for estates would add considerably to post-tax equality.Clearly the zeitgeist has changed and Arrow's commentary reflects that. The Occupy movement has altered the whole political atmosphere in the United States and Canada and elsewhere. In fact, Arrow's commentary appeared as part of a special series in the Boston Review dedicated to the Occupy movement.
Social change such as we are experiencing is often reflected well in the arts, such as film making. If you get a chance, don't miss the new movie Margin Call. It is not playing in many cinemas in Toronto at the moment, but is clearly getting good word of mouth (the packed theatre we were in last night has recently added screenings).
Check out the trailer, which, unlike most such promotional spots, summarizes the film well.